1. Supply and Demand Modules 5-9 Due by end of the week
AP Week 4
Supply and Demand
Modules 5-9 Due by end of the week

2. Monday
Objective: Be able to explain the Law of Supply and compare it to the Law of Demand. Be able to Draw a Supply Curve.
Be able to use the terminology correct to show movement or a shift
Do Now: Get your notes out and be able to show them to me. Check to see: are they dated, do you have annotation are they all collected together, do you have the handouts in with the notes?
EQ: How is Supply like Demand and how does it differ?
YOU NEED TO READ MODULES 5-9

3. Supply
You have to put on the hat of business owner, think from that perspective. What are all business owners seeking?
Anything that interferes with that will cause a change in what they supply.

4. Supply Defined
What is supply?
Supply is the different quantities of a good that sellers are willing and able to sell (produce) at different prices.
What is the Law of Supply?
There is a DIRECT (or positive) relationship between price and quantity supplied.
As price increases, the quantity producers make increases
As price falls, the quantity producers make falls.
Why? Because, at higher prices profit seeking firms have an incentive to produce more.

5. QUICK REVIEW How is that different from Demand?
What do you think will happen if the price of the item changes? Will it cause a movement up and down the supply curve? Or a shift?
What do you think would happen if other factors change, other than price?
Will those cause a movement or a shift?
What are the shifters of demand: T R I B E
Turn to your shoulder partner and discuss for 1 min. Ideas you can come up with for why a business would change how much supply there is. Be ready to share out.

6. Bottom line- businesses are in it for profit and any changes that change the profit will impact the amount they are willing and able to supply.

7. 6 Determinants (SHIFTERS) of Supply
Prices/Availability of inputs (resources)
Number of Sellers
Technology
Government Action: Taxes & Subsidies
5. Opportunity Cost of Alternative Production- like Coke making water
6. Expectations of Future Profit
Changes in PRICE don’t shift the curve. It only causes movement along the curve.

8. Handout the Supply worksheet pages 21, 22 to practice in class

9. Example of Supply
You own an lawn mower and you are willing to mow lawns.
How many lawns will you mow at these prices?
Price per lawn mowed
Quantity
Supplied
Supply Schedule $1 $5
$20
$50
$100
$1000 9

10. GRAPHING SUPPLY Draw this large in your notes Supply Schedule
Price of Cereal
Draw this large in your notes $5 4 3 2 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 10

11. GRAPHING SUPPLY Supply Schedule Price of Cereal Supply $5 50 $4 40 $32 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 11

12. companies start making
GRAPHING SUPPLY
Supply Schedule
What if new
companies start making
cereal?
Price of Cereal
Supply $5 4 3 2 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 12

13. Change in Supply Supply Schedule Price of Cereal Supply $5 50 $4 40 $32 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 13

14. Change in Supply Supply Schedule Price of Cereal Supply $5 50 $4 40 $32 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 14

15. Change in Supply Supply Schedule Price of Cereal Supply $5 70 $4 60 $32 1
Price
Quantity
Supplied $5 70 $4 60 $3 50 $2 40 $1
10 30 o Q
Quantity of Cereal 15

16. Prices didn’t change but there is MORE cereal produced
Change in Supply
Supply Schedule
Price of Cereal
Supply S2 $5 4 3 2 1
Price
Quantity
Supplied $5 70 $4 60 $3 50 $2 40 $1
10 30
Increase in Supply
Prices didn’t change but there is MORE cereal produced o Q
Quantity of Cereal 16

17. destroys corn and wheat
Change in Supply
Supply Schedule
What if a drought
destroys corn and wheat
crops?
Price of Cereal
Supply $5 4 3 2 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 17

18. Change in Supply Supply Schedule Price of Cereal Supply $5 50 $4 40 $32 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 18

19. Change in Supply Supply Schedule Price of Cereal Supply $5 50 $4 40 $32 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 19

20. Change in Supply Supply Schedule Price of Cereal Supply $5 30 $4 20 $31
Price
Quantity
Supplied $5 30 $4 20 $3 10 $2 1 $1
10 0 o Q
Quantity of Cereal 20

21. Prices didn’t change but there is LESS cereal produced
Change in Supply
Supply Schedule
Price of Cereal
Supply S2 $5 4 3 2 1
Price
Quantity
Supplied $5 30 $4 20 $3 10 $2 1 $1
10 0
Decrease in Supply
Prices didn’t change but there is LESS cereal produced o Q
Quantity of Cereal 21

22. What if cereal companies find a quicker way to make
Change in Supply
Supply Schedule
What if cereal companies
find a quicker way to make
cereal ?
Price of Cereal
Supply $5 4 3 2 1
Price
Quantity
Supplied $5 50 $4 40 $3 30 $2 20 $1 10 o Q
Quantity of Cereal 22

23. Quick Review-turn to your shoulder partner and answer- find it in your notes and show them
Explain the Law of Demand
Explain the Law of Supply
Identify the 5 shifters of demand
Identify the 6 shifters of supply
Define Subsidy
Explain why price DOESN’T shift the curve
Define Equilibrium
Define Shortage
Define Surplus

24. Tuesday- remember tomorrow is the Sr. Meeting
Tuesday- remember tomorrow is the Sr. Meeting. Do not go to 1st, go straight to auditorium. ZERO WE WILL MEET
Objective: Be able to explain equilibrium and what happens when equilibrium is changed.
Be able to create a graph showing equilibrium, and then be able to show shifts from changes to supply or demand or both
Do Now: Go back over yesterday’s notes and create a question for the information
EQ: What drives the price of goods?
Vocabulary is modules 5-9
Materials- hand out a piece of graph paper square

25. Supply Practice Hamburgers Mad cow disease kills 20% of cows
Which determinant (SHIFTER)?
Increase or decrease?
Which direction will curve shift?
Hamburgers
Mad cow disease kills 20% of cows
Price of burgers increase 30%
Government taxes burger producers
Restaurants can produce burgers and/or tacos. A demand increase causes the price for tacos to increase 500%
New bun baking technology cuts production time in half
Minimum wage increases to $10
Decrease in availability of resources, decrease.
Price doesn’t shift curve, no shift.
Government action, decrease.
Opportunity cost of alternative production, decrease.
Technology, increase.
Price of resources, decrease.

26. Supply Practice
First, identify the determinant (shifter) then decide if supply will increase or decrease
Shifter
Increase or Decrease
Left or Right 1 2 3 4 5 6
Number of consumers, increase.
Income, decrease.
Substitutes, decrease.
Price doesn’t shift curve, no change.
Tastes and preferences, decrease.
Expectations, increase.
Complements, decrease. 26 26

27. Putting Supply and Demand Together!!!
Create a Supply and Demand Curve from the schedule that follows on graph paper and then make the shifts

28. Supply and Demand are put together to determine equilibrium price and equilibrium quantity
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10 D o Q 28

29. Equilibrium Price = $3 (Qd=Qs) Equilibrium Quantity is 30
Supply and Demand are put together to determine equilibrium price and equilibrium quantity P
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
Equilibrium Price = $3 (Qd=Qs) D o Q
Equilibrium Quantity is 30 29

30. What if the price increases to $4?
Supply and Demand are put together to determine equilibrium price and equilibrium quantity
What if the price
increases to $4? P
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10 D o Q 30

31. How much is the surplus at $4?
At $4, there is disequilibrium. The quantity demanded is less than quantity supplied. P
Supply Schedule
Demand Schedule S $5 4 3 2 1
Surplus
(Qd<Qs) P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
How much is the surplus at $4?
Answer: 20 D o Q 31

32. How much is the surplus if the price is $5?
What if the price
decreases to $2? P
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
Answer: 40 D o Q 32

33. How much is the shortage at $2?
At $2, there is disequilibrium. The quantity demanded is greater than quantity supplied. P
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
How much is the shortage at $2?
Answer: 30
Shortage
(Qd>Qs) D o Q 33

34. How much is the shortage if the price is $1?
Supply Schedule
Demand Schedule S $5 4 3 2 1 P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
Answer: 70 D o Q 34

35. The FREE MARKET system automatically pushes the price toward equilibrium.
Supply Schedule
Demand Schedule S $5 4 3 2 1
When there is a surplus, producers lower prices P Qd $5 10 $4 20 $3 30 $2 50 $1 80 P Qs $5 50 $4 40 $3 30 $2 20 $1 10
When there is a shortage, producers raise prices D o Q 35

36. Shifting Supply and Demand
We focus on keeping all things equal assumption, but like with the supply of cotton and the demand increase due to increase in income there are times that both will shift, what then?
Shifting Supply and Demand

37. Assume shifts in supply or demand change equilibrium P and Q instantaneously37

38. Supply and Demand Analysis
Easy as 1, 2, 3
Before the change:
Draw supply and demand
Label original equilibrium price and quantity
The change:
Did it affect supply or demand first?
Which determinant caused the shift?
Draw increase or decrease
After change:
Label new equilibrium?
What happens to Price? (increase or decrease)
What happens to Quantity? (increase or decrease)
Let’s Practice!

39. S&D Analysis Practice Analyze Hamburgers
Before Change (Draw equilibrium)
The Change (S or D, Identify Shifter)
After Change (Price and Quantity After)
Analyze Hamburgers
Price of sushi (a substitute) increases
New grilling technology cuts production time in half
Price of burgers falls from $3 to $1.
Price for ground beef triples
Human fingers found in multiple burger restaurants.
1. Demand Increases
2. Supply Increases
3. No Shift. Shortage
4. Supply Decreases
5. Demand Decreases

40. Double Shifts
Suppose the demand for sports cars fell at the same time as production technology improved.
Use S&D Analysis to show what will happen to PRICE and QUANTITY.
If TWO curves shift at the same time, EITHER price or quantity will be indeterminate.

41. Use a S&D to explain this double shift41

42. Wednesday
Objective: Be able to demonstrate that you can define and recognize terms used so far in this unit, be able to create different graphs and show movement or shifts, be able to read and answer questions over supply and demand show your work.
Verbalize with your group to complete the task at each station.
Do Now: Record in your planner and notes. Then read over your notes on Supply and Demand. Annotate and Summarize
EQ: How do I read the questions to understand what they are asking? How do I apply the different knowledge to different applications? Can I create PPC, S & D graphs?

43. Today
You and your group of 2-4 will go to different labs and complete the task at each lab.
You will all participate and make sure that everyone understands.
Answer the questions or complete the task and then you will need to move on.
There are 4 different stations. Approx. 10 min. per station
Life Size graphing-
Vocabulary practice
Vocabulary search
Supply and Demand Changes

44. Wednesday in Closing What was your biggest challenge?
Did you figure it out? Get it answered?
Do you now understand?
Where do you feel the most confident?
If you have a shift in both supply and demand will the price and quantity both be able to be determined?

45. Thursday
Objective: Be able to explain what a price ceiling and a price floor is?
Be able to write what happens when they are created.
Do Now: Visit with your shoulder partner on what a complement and substitute are and how they impact demand?
EQ: What is created with a floor and a ceiling and who benefits from them? What are quantity controls?

46. Government Involvement
#1-Price Controls: Floors and Ceilings #2-Import Quotas #3-Subsidies #4-Excise Taxes

47. #1-PRICE CONTROLS
Who likes the idea of having a price ceiling on gas so prices will never go over $1 per gallon?

48. To have an effect, a price ceiling must be below equilibrium
Maximum legal price a seller can charge for a product.
Goal: Make affordable by keeping price from reaching Eq.
To have an effect,
a price ceiling must be
below equilibrium P
Gasoline S $5 4 3 2 1
Does this policy help consumers?
Result: BLACK MARKETS
Price Ceiling
Shortage
(Qd>Qs) D o Q 48

49. To have an effect, a price floor must be above equilibrium
Minimum legal price a seller can sell a product.
Goal: Keep price high by keeping price from falling to Eq.
To have an effect,
a price floor must be
above equilibrium P
Corn S $ 4 3 2 1
Surplus
(Qd<Qs)
Price Floor
Does this policy help corn producers? D o Q 49

50. Practice Questions
1. Which of the following will occur if a legal price floor is placed on a good below its free market equilibrium?
Surpluses will develop
Shortages will develop
Underground markets will develop
The equilibrium price will remain the same
The quantity sold will increase
2. Which of the following statements about price control is true?
A. A price ceiling causes a shortage if the ceiling price is above the equilibrium price
B. A price floor causes a surplus if the price floor is below the equilibrium price
C. Price ceilings and price floors result in a misallocation of resources
D. Price floors above equilibrium cause a shortage
Answers: D C

51. Are Price Controls Good or Bad?
To be “efficient” a market must maximize consumers and producers surplus P S CS Pc PS D Qe Q

52. Are Price Controls Good or Bad? DEADWEIGHT LOSS The Lost CS and PS.
To be “efficient” a market must maximize consumers and producers surplus P S CS
Price FLOOR
DEADWEIGHT LOSS The Lost CS and PS.
INEFFICIENT! Pc PS D
Qfloor Qe Q

53. Are Price Controls Good or Bad?
To be “efficient” a market must maximize consumers and producers surplus P S CS Pc PS D Qe Q

54. Are Price Controls Good or Bad? DEADWEIGHT LOSS The Lost CS and PS.
To be “efficient” a market must maximize consumers and producers surplus P S
DEADWEIGHT LOSS The Lost CS and PS.
INEFFICIENT! CS Pc
Price CEILING PS D
Qceiling Qe Q

55. #2 Import Quotas A quota is a limit on number of imports.
The government sets the maximum amount that can come in the country.
Purpose:
To protect domestic producers from a cheaper world price.
To prevent domestic unemployment

56. International Trade and Quotas
Identify the following:
CS with no trade
PS with no trade
CS if we trade at world price (PW)
PS if we trade at world price (PW)
Amount we import at world price (PW)
If the government sets a quota on imports of Q4 - Q2, what happens to CS and PS?
1.H
2.TLI
3.HIJKLMNRS
4.T
5.Q5-Q1
6. CS gets smaller and PS gets bigger
This graphs show the domestic supply and demand for grain. The letters represent area.

57. 1.H
2.TLI
3.HIJKLMNRS
4.T
5.Q5-Q1
6. CS gets smaller and PS gets bigger

58. #3 Subsidies The government just gives producers money.
The goal is for them to make more of the goods that the government thinks are important.
Ex:
Agriculture (to prevent famine)
Pharmaceutical Companies
Environmentally Safe Vehicles
FAFSA

59. Result of Subsidies to Corn Producers
Price of Corn S
SSubsidy
Price Down
Quantity Up
Everyone Wins, Right? Pe P1 D o Qe Q1 Q
Quantity of Corn 59

61. Excise Tax = A per unit tax on producers
#4 Excise Taxes
Excise Tax = A per unit tax on producers
For every unit made, the producer must pay $
NOT a Lump Sum (one time only)Tax
The goal is for them to make less of the goods that the government deems dangerous or unwanted.
Ex:
Cigarettes “sin tax”
Alcohol “sin tax”
Tariffs on imported goods
Environmentally Unsafe Products
Etc. 61

62. Government sets a $2 per unit tax on Cigarettes
Excise Taxes
Supply Schedule
Government sets a $2 per unit tax on Cigarettes P P Qs $5
140 $4
120 $3
100 $2 80 $1 60 S $5 4 3 2 1 D o Q 62

63. Government sets a $2 per unit tax on Cigarettes
Excise Taxes
Supply Schedule
Government sets a $2 per unit tax on Cigarettes P P Qs
$5 $7
140
$4 $6
120
$3 $5
100
$2 $4 80
$1 $3 60 S $5 4 3 2 1 D o Q 63

64. Tax is the vertical distance between supply curves
Excise Taxes
STax
Supply Schedule P P Qs
$5 $7
140
$4 $6
120
$3 $5
100
$2 $4 80
$1 $3 60 S $5 4 3 2 1
Tax is the vertical distance between supply curves D o Q 64

65. Thursday in closing
Objective: Be able to explain what a price ceiling and a price floor is?
Be able to write what happens when they are created.
Do Now: Visit with your shoulder partner on what a complement and substitute are and how they impact demand?
EQ: What is created with a floor and a ceiling and who benefits from them? What are quantity controls?

66. Friday
Objective: Be able to demonstrate a knowledge of supply and demand and how to shift them. Be able to explain what happens to the price and quantity.
Be able to communicate in your group so that everyone understands how to draw the graphs and answer the questions.
Do Now: Go back over your notes from yesterday and prior days. Highlight and summarize.
EQ: How does supply and demand work on graphs? What does it do to prices and quantities?

67. In small groups of 2-4 complete the practice work sheets
In small groups of 2-4 complete the practice work sheets. Work together to answer them and turn your completed sheets in as a group.
Everyone needs to complete the sheets.